WillsWhat Can be Done to Minimise Chances of a Successful Claim under the Inheritance 1975 Act?

Where a testator intends to exclude a person who is a potential applicant under the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act), or perhaps make a minor gift to them, one of the most common questions you might receive is what can be done to minimise the chance of that person bringing an application under the 1975 Act. Aside from making reasonable provision for that person, there is little that can be done to stop them attempting an application. There are however steps that could be taken by clients to stop an application being successful.

Letter of Wishes

The most common step to take when making potentially unreasonable provision would be for the client to write a letter of wishes detailing their reasons for their decision. It can also be advisable to include the reasons why other beneficiaries are inheriting.

If an application under the 1975 Act is made, the Act does not require the courts to have regard to the deceased’s reasons for their decision, however the courts can consider these relevant if the reasons are good and based on truth. The letter of wishes is not sufficient to prevent an application being made entirely but will help explain why the deceased acted as they did, why they think they are acting reasonably and show they are not acting under any delusions.

These reasons should be recorded in a letter of wishes rather than the will itself, as the will becomes a public document once probate is granted whereas the letter of wishes will not.

Exclusion Clause

A specific clause could be included in the will to state that the testator has specifically excluded or made lesser provision for that particular person. This again does not prevent that potential applicant from attempting a claim, but including a formal exclusion makes it clear from the face of the will that this person has not been excluded in error and that the testator has done this intentionally.

Forfeiture Clause

Where the testator is leaving a potential claimant something, but likely not enough to be considered as reasonable provision, they may wish to consider a forfeiture clause in the will, also known as a no-contest clause. This clause would state that if any beneficiary under the will brings a 1975 Act application or any other proceedings to contest the validity or provisions of the will, the gift to that person would fail.

This clause does not prevent a claim being made, but it gives the beneficiary the risk that if they do attempt proceedings against the estate and they fail that they will lose any entitlement under the will.

There has been recent case law in this area, the case of Sim v Pimlott and others [2023] EWHC 2296 (Ch) covered an application by a wife on the estate of her late husband, whose will included a forfeiture clause along with provision that she did not consider reasonable. The judge in the case provided the following comments.

“In circumstances where the actual provision made by the will is objectively reasonable…it was also reasonable to include a provision intended to discourage the relevant beneficiary from embarking upon what is…a [potentially] unwarranted claim”.

“it would be wrong in principle for a claimant to pursue a 1975 Act claim in the knowledge that in doing so, they will forego a certain benefit; and then to say that, because they have foregone that benefit, the will fails to make reasonable financial provision for that beneficiary”.

Lifetime Planning

It is possible to complete lifetime planning to try and avoid 1975 Act claims. There are anti-avoidance provisions included in S10 of the Act however. In short, these provide that the courts can ‘claw back’ gifts made in the 6 years immediately before the deceased’s death if the gift was made with the intention of defeating a 1975 Act claim. Any gifts made more than 6 years before death are not caught by these rules.

Trusts

There are a number of situations where trusts may be advisable as a way to mitigate the risks of a 1975 Act application. Several examples are provided below.

A common example of this could be where a person wishes to exclude a disabled/vulnerable child, passing assets instead to another child wishing that the benefitting child ‘looks after’ their sibling. This could leave open the risk of a 1975 Act claim, whereas passing a share of the estate to a disabled person’s trust would mitigate this risk.

Where a surviving spouse or civil partner is potentially being excluded, a life interest trust could be considered rather than excluding them outright.

There may be times where a discretionary trust could be considered where a beneficiary has requested to the testator that they be removed. We considered this in more detail in a previous article.

We would advise against the use of a discretionary trust as a way to mask or hide the exclusion. As an example, if the testator is excluding their son and wishes their estate to go to their daughter, we would advise against the use of a discretionary trust, with the letter of wishes detailing the wish that the trustees distribute everything to the daughter. Whilst this may mitigate the chances of a 1975 Act application, as on the face of the will the son is a potential beneficiary, the likely effect of this would be the son bringing actions against the trustees instead.

 

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